Wubi installs Ubuntu on a file so, you don't need to make partitions for it. Also Wubi is intended for you to try Ubuntu and if you like it make a partition(s) and install Ubuntu properly.
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Uri HerreraMar 3 '13 at 4:35

@Nick - please register your account and then click the link at the bottom of the page to ask for both of your unregistered accounts to be merged. Thanks.
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fossfreedom♦Mar 3 '13 at 9:59

2 Answers
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The Wubi aim is to enable existing Windows users, unacquainted with Linux, to try Ubuntu without risking any data loss (due to disk formatting or partitioning mistakes). It can also safely uninstall Ubuntu from within Windows.

Wubi (Windows-based Ubuntu Installer) is an official Windows-based free software installer for Ubuntu, which installs the software on an existing Windows partition, thus without need for partitioning.

Wubi adds an entry to the Windows boot menu which allows the user to run Linux. Ubuntu is installed within a file in the Windows file system (c:\ubuntu\disks\root.disk), as opposed to being installed within its own partition. This file is seen by Linux as a real hard disk. Wubi also creates a swap file in the Windows file system (c:\ubuntu\disks\swap.disk), in addition to the memory of the host machine. This file is seen by Ubuntu as additional RAM.

Limitation of Wubi:

Compared with a regular installation, a Wubi installation faces some limitations. Hibernation is not supported and the filesystem is more vulnerable to hard reboots.[1] Also, if the Windows drive is unmounted uncleanly (Windows crash, power failure, etc.), Ubuntu will not be able to mount the Windows drive and boot until Windows has successfully booted and shut down. If the Windows system cannot be booted after the crash, the user also cannot boot Ubuntu.

Performance related to hard-disk access is also slightly slower, more so if the disk image file is fragmented, on a Wubi install compared to a normal one.

Since Wubi installs root.disk on top of the Windows file system which could technically become corrupted and even prevent Windows from booting, running chkdsk /r (may take a significant amount of time to run) to fix the damaged file system and shutting down Windows cleanly may help.